AICPA Exam CPA-Business Topic 2 Question 72 Discussion

Choice 'd' is correct. Inspections. Inspections are part of order costs, not carrying costs.

Choices 'a' and 'c' are incorrect. Inventory carrying costs include all costs associated with warehousing (storing) inventory (e.g., storage, insurance, obsolescence, and spoilage associated with holding inventory).

Choice 'b' is incorrect. The economic cost of holding inventory includes the implicit (opportunity) cost of foregoing a return on the money invested in inventory.